How can you protect yourself and still get a good deal?
We tell you how to get a better deal on finance, dissect common scams, and the best ways to protect yourself.
Buying outright or finance?
Most people in Australia, young or senior, will need some kind of finance. Cars are not cheap – and spreading out the cost over five years won’t hit your pocket as hard as taking money out of your superannuation; that’s supposed to keep growing as you get older.
To find out how much you can afford to pay in repayments, you can conduct research with a car loan repayments calculator. You need to know the amount you intend to borrow, the loan term, and the interest rate. More on this later.
Shop around for loans, too
Dealers will try to lock you into their own finance product – well, you’re already in the building, right? Like buying your groceries at 2am at a 7-Eleven, you pay a premium for that convenience.
While not a scam per say, dealer finance is definitely tipped in the dealer’s favour, since you – the customer – isn’t able to effectively compare the interest rate you’re offered with all the other options in the market.
Shop for loans beforehand and see what’s out there. Look for comparison rates, as they show you how much the loan will cost with most fees and charges included.
Also be wary of “zero per cent” or “one per cent” deals – these usually come with high fees and a whole lot of caveats. To make sure you get a good loan deal, look for a specialist car loan broker instead of going to your bank first.
Be wary of the upsell
Many dealers offer numerous upsells on your basic purchase. Think dashboard mats, window tinting, extra paint protection, floor mats … the list goes on. What the savvy shopper should be aware of, however, is that none of these extras are actually necessary. It’s a well-known psychological sales tactic that customers who are “primed to buy” more readily agree to upsells.
Instead, save yourself hundreds or thousands by giving yourself a cooling off period. You can be guaranteed all of those optional extras will still be available down the road when and if you decide you need them.
If you are buying a car, timing is important. Most cars are sold before the end of financial year and around Christmas time. Why? Because dealers are desperate to make sales.
If you can’t wait, approach dealers at the end of the month. This is because dealers want to boost their sales figures, so they can meet quota or gain extra bonuses.
Having the ultimate trump card is loan pre-approval. This means getting approved for a loan before you buy. Usually, you have a month to buy the car and “activate” the loan. The loan application process is much the same, but it gives you a bargaining chip – a price ceiling.
Savvy Managing Director Bill Tsouvalas says it can drive a great deal.
“Dealers want hot leads. Saying you have pre-approval means you’re ready to buy. But if they want to make a sale – and they always do – they will need to meet your price. If they can’t, you have to walk away. Sticking to your guns and staying firm on the price can help you drive away for significant savings on the list price.”
It also works for private sellers – they know you aren’t just “tyre-kicking” – you have finance lined up and can fulfill your end of the bargain. However, private sellers may not be as forthright as you are.
Common private sale scams – and how to avoid them
You don’t have to buy a new car from a dealer – but it does expose you to added risks such as scams.
One of the most common scams is the delivery scam. You see your desired car for a great price. The seller says they can deliver the car to your door for inspection – for a small fee or “holding deposit”. If you pay the fee, the “seller” vanishes with your money.
The same goes for sellers who are “leaving the country” immediately, usually posing as military on imminent deployment or FIFO workers. The price is unbelievable – and so is the car. They ask you to transfer the money and they’ll ship the car to you; but as soon as you do, you’ve been scammed.
Unless you can inspect the car physically, don’t even consider it. If anyone asks for money before you can drive away, this is a dead giveaway of a scam.
Some sellers may ask for alternative payment methods, such as money orders, cryptocurrency (Bitcoin, Ethereum, etc.), gift cards, and other bizarre items: this should raise a big red flag.
You should also give a firm “no” if a seller asks to meet you in a secluded location, such as a car park after dark, a park, or deserted factory area on off hours. Your personal safety may be at risk.
Due diligence – PPSR and independent valuation
Before committing to any test drives or inspections, you should check if the car for sale is on the Personal Property Security Register. This records write-offs, stolen vehicles, and vehicles with finance owing. If it shows up, walk away.
If your private seller is legitimate, you can ask to have the car independently checked and valued – Royal Automobile Clubs (RACQ, RACV, etc) offer these services for a small fee.
If they’re cagey about any of the above, you should walk away. You should also have a friend or relative come with you to test drive the vehicle to give you impartial advice and for your own safety.
Knowing what’s out there can go a long way in helping you avoid scams and drive away safely with more money in your pocket.